It has been about a month since the last earnings report for Cabot (CBT). Shares have lost about 10.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cabot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Cabot's Earnings and Revenues Trail Estimates in Q1
Cabot reported profits of $41 million or 70 cents per share in the first quarter of fiscal 2019 (ended Dec 31, 2019), down from $69 million or $1.14 per share in the year-ago quarter.
Barring one-time items, adjusted earnings per share were 69 cents, down from 87 cents in the year-ago quarter. Also, the figure missed the Zacks Consensus Estimate of 76 cents.
Net sales fell 11.4% year over year to $727 million in the quarter. It also trailed the Zacks Consensus Estimate of $793.6 million.
Reinforcement Materials’ sales fell 17.1% year over year to $379 million in the reported quarter. Earnings before Interest and Tax (EBIT) in the segment were $47 million, down 24.2% year over year. Margins were affected by lower volumes globally, which also led to lower energy center revenues and a slower inventory turnover.
Sales in the Performance Chemicals unit went up 4.8% year over year to $242 million in the reported quarter. EBIT rose 13.9% year over year to $41 million on higher volume.
Sales in the Purification Solutions declined 9.2% year over year to $59 million in the quarter. The segment generated a loss of $2 million, which was narrower than a loss of $3 million in the year-ago quarter.
Cabot had cash and cash equivalents of $173 million at the end of fiscal first quarter, up 21.8% year over year. The company’s long-term debt rose 73.5% year over year to $1,095 million.
Cash flows from operating activities were $105 million in the reported quarter. Capital expenditures were $68 million.
For the Reinforcement Materials unit, the company expects to benefit from the calendar year 2020 customer agreements. Moreover, volumes are likely to return to a normalized level starting second-quarter fiscal 2020.
In the Performance Chemicals unit, the company anticipates the challenging price environment for fumed silica in Europe and China that it witnessed during the fiscal first quarter. The trend is likely to continue in the near-term.
For the Purification Solutions unit, the company continues to expect improvement in EBIT on a year-over-year basis.
For fiscal 2020, adjusted earnings are projected in the range of $3.60-$3.90 per share compared with $3.60-$4.10 expected earlier.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -16.88% due to these changes.
At this time, Cabot has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Cabot has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cabot Corporation (CBT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research